Though often overlooked, the trucking industry is critical to the health on the US economy. Think about it: without truck drivers delivering goods, interstate commerce would grind to a screeching, tire-burning halt.
Unique Challenges
Despite the importance of trucking companies, the way the system is structured often leaves them within a shaky financial position. Truck companies submit invoices for services rendered, and then often wait 30-90 days for payment on the accounts receivables.
For a bigger company with large cash reserves, waiting to be paid would not be a problem. But for small to mid-size companies operating on a strict budget, it might not be an option. Expenses with regard to example payroll and gas come in the time between payment, and not paying your drivers is never a good business repeat. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is a recipe for financial hardship.
Therefore, trucking companies often have to turn to outside backing. The following are some options for trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet by which businesses sell their accounts receivables to a factoring company. Approval for factoring centered on the creditworthiness of the trucking company’s customers.
At the amount of the sale, customer gets 80-90% of the cash back immediately from the invoices. The remainder of the balance comes after customer repayment, less a portion fee that typically ranges from 1-5%.
This option is best for B2B companies that cannot afford to wait for payment, as well as the cost is usually 4-5% monthly with a powerful annual interest rate typically between 18-30%.
Bank Loans
Though in order to come by, bank loans are an cheapest type of financing. Mortgage process involves an application and analysis of the company’s creditworthiness and financial profile. Small companies especially can be turned down for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s bank account. This form of funding ideal for for trucking outfits by using a great credit file and do not require the money immediately.
Cash-Advances
Cash advances take place when business receives a loan sum from the lender. Business pays loan provider back with percentages of that monthly card receipts until the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, which cannot be changed retroactively. The profit to cash advances is immediate cash- is certainly the fastest method for obtaining cash without in order to be a loan shark.
This financing method is best for trucking companies who require immediate cash for a much smaller amount associated with your and have limited financing options. Will not find is usually 20% or even more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for cash money.
It is better for trucking companies with valuable plant or equipment assets which usually underutilized, as well as the cost is monthly lease payments in addition to depreciation and tax burdens of resources.
Choices, Choices
Every trucking company is unique, and it is nearly them to locate funding solutions that meet their individual needs. Being informed on all possibilities is customers step toward finding a fitting cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444
Posted on:
September 18, 2019